Dallas Fed: Texas economy expanded at 'moderate' pace in Q1

The Texas economy continued to grow at a "moderate" pace in the first three months of the year, but the outlook is brighter for the rest of the year, according to a report from the Federal Reserve Bank of Dallas.

Recent Fed surveys indicate that Texas' economic activity accelerated in April and companies are slightly more optimistic.

Employment

Employment grew at a 2.4 percent annualized rate in the first quarter, compared with the previous quarter's 2.3 percent and last year's 2.5 percent. The unemployment rate fell to 5.5 percent in March, its lowest level in five years.

The state's job growth ranks No. 6 nationally - the same as in 2013, but down from No. 3 in 2012.

Texas has added jobs faster than the nation so far this year. Employment is projected to pick up, growing 2.8 percent for the year.

Housing

Single-family home permits and existing home sales grew in February, but edged down in March. Housing inventories remained at record lows in metro areas across Texas, including Dallas, in March.

The housing market is expected to continue growing this year, but it will face some headwinds. Rising mortgage rates, higher prices and tighter lending standards may dampen home sales. Labor and developed lot shortages, wage pressures and construction cost increases may curb home building.

Energy

Energy activity is robust and drilling activity continues to increase, according to the Beige Book from late February through early April. The oil and gas rig count was 894 as of April 25, a level not seen in nearly two years. Texas accounted for 60 percent of the increased U.S. drilling.

Crude oil prices averaged $102 a barrel as of April 25, up about $2 from six weeks earlier. Natural gas prices have fallen over the past six weeks, but were higher than a year ago.

Exports

Texas exports fell 4.8 percent in February after growing 3 percent in January, a sign of weak international demand. Exports to Mexico are expected to improve this year, after declining in the fourth quarter as the Mexican economy slowed down last year.

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